Pension losses mount in Q1: RBC Dexia

Retail money managers tend to keep a close eye on what “the smart money” is doing. With pension funds holding billions of dollars, the advice they can afford typically qualifies. Pension fund managers extended their losing streak in the first quarter of 2009, after getting beaten up like the rest of the market in late […]

By Steven Lamb | April 22, 2009 | Last updated on April 22, 2009

2 min read

Retail money managers tend to keep a close eye on what “the smart money” is doing. With pension funds holding billions of dollars, the advice they can afford typically qualifies.

Pension fund managers extended their losing streak in the first quarter of 2009, after getting beaten up like the rest of the market in late 2008, according to RBC Dexia Investor Services.

Among the funds that RBC Dexia monitors, worth about $310 billion, assets shrank by 2.5% in the first three months of this year. Twelve-month losses now total 16.3%, considerably better than most global equity indices, but far too volatile for the pension world.

“Six of the last seven quarters have been negative, with stock markets again testing historic lows,” says Don McDougall, director of advisory services with RBC Dexia. “It has been a bumpy ride, but March finished strong and, so far, April is also looking up.”

Global equity was the biggest drag on the Dexia-monitored funds, with losses of 9.3%, but they managed to outperform the MSCI World index by 90 basis points.

“The index has plunged 37.4% in local currency terms for the year, but once exchange rates are taken into account, the weaker loonie helped reduce pension losses to 30.4%,” says McDougall.

On the bright side

Domestic equity holdings were a relative bright spot, with that segment of assets losing only 2% in Q1.

“Pensions remained underexposed to the better performing materials, and energy sectors and consequently [something missing?] lagged the quarterly S&P TSX composite index by 0.7%,” says McDougall. “Over the year, however, active management has paid off handsomely. Pensions beat the index by 1.8%.”

The bond market continued to serve its purpose, providing stability in tough economic times. Domestic bond allocations earned 1.6% for the funds in the study.

Since the onset of the financial crisis, government debt has been the strongest performer, but in the latest quarter, corporates outperformed across the maturity spectrum.

(04/22/09)

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